Outsourcing Vs Automation – the End Game

The outsourcing world has, to date, been pretty resilient to the onslaught of RPA and other automation tools. Despite RPA being a direct competitor to outsourcing in many respects (outsourced processes tend to be rules-based, repeatable and high volume, which is exactly the criteria one would look at when selecting RPA candidate processes) the Business Process Outsourcing (BPO) providers have managed to keep hold of their clients without really having to address the challenge of automation. The more cynical of us would suggest that this was done deliberately because most outsourcing deals are paid by the FTE, and RPA tends to reduce the number of FTEs required, so this employee can be engaged in other tasks. This brings us to the next question: why would outsourcing providers implement RPA if it meant a drop in revenue?

But all that looks like it is about to change. In a recent survey carried out by Horses for Sources (HfS), they found that the outsourcing sector is now scraping along the bottom of the market; nearly half of respondents (from 355 operations leaders in the Global 2000) said that they were going to reduce their reliance on outsourcing next year. Interestingly, that’s a huge drop from last year when the number was a quarter. So, what are the Global 2000 companies going to do instead? Up to half will look to find another provider, but a similar number are looking to embed significant automation into their current engagement. A sixth are looking to bring it all back in house. In Finance & Accounting Outsourcing (FAO) in particular, the desire to embed automation (36%) is actually greater than the desire to churn their supplier (34%).

It’s clear then that the outsourcing providers need to do something quickly if they are going to be able to react to the demands of their clients: essentially the choice is ‘automate or die’. They will need to break their very traditional FTE model and deliver automated services in preference to human services. From an outsider’s point of view that shouldn’t seem too difficult – some providers have been offering outcome-based pricing for a while, and if the choice is automated business or no business at all, then that should be motivation enough. But the mindset of the outsourcing provider is very entrenched, and it will take a huge cultural shift to bring this about. This is in stark contrast to the mind-set of the buyers, who have now ‘seen the light’ and want the benefits of automation as quickly as possible.

Which means that there is a huge opportunity for some organisations to step in a take on the mantle of the outsourcing provider of 2020. This challenge could come from the RPA vendors themselves (if they brought on teams of consultants and changed their business model) or the current raft of RPA implementation firms who could move from project-based work to a managed-service model. Or some new entrants that have capabilities across the full range of digital technologies.

But the survey was focused on outsourcing, so saw the results through the lens of the outsourcing provider and buyer. Surely the best solution (which, to their credit, HfS have identified) is for enterprises to go straight to digital. Why bother with outsourcing at all, especially if the provider is going to drag their feet about it? Why not keep (or bring) all the processes in house and, using expert partners, automate the heck out of them?

Whatever way you look at it, the outsourcing market is undergoing a huge transformation, due to this time of change. To take back control of this market the only option is to adapt to new RPA technologies, (and some providers will certainly do so), or die in the attempt.

 

Tags: #RPA #FutureOfWork #DigitalProcesses #PhysicalRobots, intelligent automation, RPA